Residential Tax Benefits for Military Spouses

Residency benefits that are available to military personnel under the Servicemembers Civil Relief Act (SCRA) now also apply to military spouse’s nonmilitary income under certain circumstances.

In 2009 the Military Spouses Residency Act (MSRRA) (Public Law 111-97) was signed into law. This act prohibits a service member’s spouse from either losing or acquiring state taxation residence if their residence is the same for taxation purposes because he or she is absent or present in any U.S. tax jurisdiction strictly for the purpose of being with the service member because of their military orders.

This same law also prohibits a spouse’s income from being considered income earned in a tax jurisdiction if the spouse is not a resident of such jurisdiction when the spouse is in that jurisdiction solely to be with the service member who is serving under military orders.

Military spouses falling under this law should file Form 740-NP Kentucky Individual Income Tax Nonresident or Part-Year Resident to request a refund of the Kentucky income tax that was withheld from his or her pay. The income would not be reported as taxable on the Kentucky income tax return. Writing across the return “MILITARY SPOUSE” will assist the department in identifying those particular returns. Military spouses should file a new Form K-4 with his or her employer to claim the exemption from withholding of Kentucky income tax.

If there are any further questions about this issue you can contact Lindemeyer CPA by email or phone by calling (502) 241-5205.

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